Re: What if and Why of Zero Taxation

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

John:

Keynes once observed that Governments collect Taxes from their citizens in
different forms.

A German, he wrote, calls the Tax Receipt 'Money' and puts it in his Wallet;

A Frenchman calls it 'Bond' and puts it in the Family Safe; while

An Englishman throws it in the Wastepaper Basket.

What was his point?

Keynes was talking Monetary Theory of the kind where Money/Bonds/Taxes are
three alternative means of diverting part of the economy's output of goods
and services from Factor Income Recipients to Government.

As in Monetary Theory of the Circular-flow rather than Chartalist variety.

Gunnar



----- Original Message -----
From: "John Gelles" <johng@xxxxxxxxxx>
To: "Post Keynesian Thought" <pkt@xxxxxxxxxxxxxxxx>; "Victory Over Want"
<vow@xxxxxxxxxx>
Sent: Friday, January 25, 2002 9:03 AM
Subject: What if and Why of Zero Taxation


>         Berglund, Hummel and Winslow almost reached
>         the "why" of this subject on the 'Korean War two
>         currency' thread.
>
>
>         -- If no taxes were collected than government
>             spending would either keep adding new money
>             to the economy or government would have to
>             borrow old money from firms and individuals
>             to match its spending the way taxes can. --
>
>                 Paraphrase of Per Berglund
>
>        --  Zero tax revenues would require that the
>             Treasury finance its spending by borrowing
>             from the public or from the central bank. --
>
>                 Paraphrase of William Hummel
>
>         The above mention of "what if" does not make
>         explicit another form of borrowing that would
>         allow the Treasury to spend budgeted money
>         without balancing it to budgeted tax revenues.
>
>         Such form of borrowing could be public savings
>         deposited with the Treasury.
>
>         Now to the "Why":  IF instead of paying taxes,
>         taxpayers only saved the same amounts, the
>         taxpayers would feel comfortable. Saving in
>         lieu of taxes would be seen as protecting the
>         value of money -- not taking the shirt off a
>         taxpayer's back.
>
>         When the time came for taxpayers to spend
>         some of these savings, the economy would
>         have to have grown in the output of things to
>         buy sufficiently for such spending to have
>         no effect on price.
>
>         This appraoch to zero taxation highlights the
>         main purpose of taxes as a tool to prevent
>         hyperinflation. Savings deposited with the
>         treasury do the same thing.
>
>         If we would avoid deflation and recession,
>         we should also avoid taxes.
>
>         If we would avoid high inflation and hyper-
>         inflation, the use of such special savings in
>         place of taxes will have to be well managed--
>         there may be times when spending of such
>         savings would have to be temporarily
>         controlled.
>
>
>
>